2020’s Most and Least Financially Literate States

Financial literacy is the ability to understand and use money skills to maintain your personal finances. This mostly applies to simple money skills the everyday person uses, like building a grocery budget and saving for a rainy day and retirement. 

Our first experiences with money typically begin when we get our first allowance or cash as a birthday gift. Most of us probably relate to saving up from mowing lawns, or some other simple venture, to buy the newest video game. Then we head to the store, grab the game, and get to the checkout where we learn about sales tax because our exact amount of $59.99 wasn’t enough. 

Depending on what state you’re in, you probably learned a little more about budgeting, taxes, and how to choose a credit card with a low APR in high school economics or personal finance. For many others, your school may not have required or even offered these opportunities, leaving you to Google “how to budget” to advance your financial education on your own. 

Financial literacy is the core of healthy money management and a bright financial future, and it begins with what you learn as a child and in school. This sets the tone for how you budget and save, which is why we set out to learn which states are the most financially literate, and which have some learning to do. 

We analyzed which states require economic and personal finance education in high school and compared median household income with average household debt to determine which states are the most financially literate.

Map of high school economic requirement across the U.S.

Most Financially Literate States

These states not only value financial education more than most, but they also have relatively low levels of debt compared to their median salary and enjoy an overall stable financial well-being. Michigan, Arizona, Virginia, and Tennessee make the grade when it comes to financial literacy.

Average individual debt in the most financially-literate states

1. Michigan

Michigan has the second-highest financial education requirements — offering both economics and personal finance courses, as well as testing students on both subjects. The Great Lakes State also comes 13th for the lowest debt-to-income ratio with an average household debt of $37,510 versus a median income of $56,697. Michigan has the highest financial well-being score of any state at 51, meaning more than half of residents have automatic savings deposits and 32 percent always pay off their credit cards in full.

  • Financial well-being score of 51
  • Ranks 13th for debt-to-income ratio
  • Tests on economics and personal finance

2. Arizona

Although Arizona beats out Michigan with the fourth-lowest debt-to-income ratio, the lowest of our list, there is a large gap in the state’s education requirements. Arizona requires both economics and personal finance to be offered but only requires economics to be taken as part of their core curriculum. 

  • Financial well-being score of 49
  • Ranks 4th for debt-to-income ratio
  • Only requires an economics course and no testing

3. Virginia

Virginia is known as the birthplace of the nation and also takes the title of third most financially literate state. Virginia and Tennessee both offer and require personal finance and economics courses be taken in high school, but don’t include either in their standardized testing process. Virginia also falls just short of Michigan with $17,262 more average debt than they’re estimated to pay off in a year. 

  • Financial well-being score of 49
  • Ranks 14th for debt-to-income ratio
  • Requires both personal finance and economics courses, but no testing

4. Tennessee

While Tennessee brings home the 10th lowest salary in the U.S. the data show they manage their money pretty well. Despite making little more than $52,000, they have the 19th lowest debt-to-income ratio with an average $39,240 in debt. They also have a financial well-being ranking of 49, meaning a majority of Tennesseeans have at least a couple of hundred dollars in savings but they do find it somewhat difficult to make ends meet.

  • Financial well-being score of 49
  • Ranks 19th for debt-to-income ratio
  • Requires both personal finance and economics courses, but no testing

Least Financially Literate States

These four states not only have lower financial education requirements than others but may have a harder time paying their bills. They’re also more likely to have a disproportionate amount of debt assuming they spend the recommended 36 percent of their income paying off their loans and credit cards. Vermont, Montana, Washington, and West Virginia may need to hit the books to improve their financial literacy. 

Average debt breakdown by individual in the least financially literate states

1. Vermont

Vermont comes last in our study, with the fourth-highest debt ratio with $62,760 in debt, compared to their median household income of $60,782 with an expected yearly debt payoff of $21,882. Additionally, Vermont has no education requirements. In fact, high schools aren’t required to offer economics or personal finance courses at all.  

  • Financial well-being score of 46
  • Ranks 47th for debt-to-income ratio
  • Courses aren’t required to be offered

2. Montana

Montana is the only state in our bottom four that has any high school course expectations, though it only requires that high schools offer a personal finance course. The Treasure State also ranks 29th for debt-to-income ratio, with $23,652 of debt left after a yearly payoff of $19,917, based on a median income of $55,326.

  • Financial well-being score of 47
  • Ranks 29th for debt-to-income ratio
  • Courses aren’t required to be offered

3. Washington

Washington state has the fifth-highest debt per household in the U.S. and the highest at $63,680 of debt. While they also make quite a bit more than many other states at $74,073 a year, that’s not enough to save them from having the 11th highest debt-to-income ratio of our study — especially when you consider that they have no finance education requirements incorporated into their curriculum. 

  • Financial well-being score of 48
  • Ranks 42nd for debt-to-income ratio
  • Courses aren’t required to be offered

4. West Virginia

West Virginia has the lowest median income of our list, earning just over $44,000 a year. Their average debt isn’t too far behind, with $39,290 owed per household. That’s enough for them to pull just ahead of Montana for their debt-to-income ratio, ranking 27th overall. However, they’re tied for the lowest financial well-being score at 46 and have zero financial education requirements. 

  • Financial well-being score of 46
  • Ranks 27th for debt-to-income ratio
  • Personal finance must be offered

Financial Education Resources

It’s never too late to learn more about money! If you’re ready to level-up your financial know-how, here are some resources for every age and ability level.

There is a 40% overlap between the states with the worst debt-to-income ratio and those with the fewest financial education opportunities in high school

Tips to Teach Kids About Money

The sooner we introduce the concept of money, earning, and fiscal responsibility to kids, the better hands our country’s financial future will be in. A small allowance and practice saving is a great place to start, but don’t forget to cover the sales tax when you go out shopping. You can also ditch the cash and get your child an allowance debit card. This way you can teach them to track their balance and practice basic math while learning about interest. 

Money matters are also easy to gamify. You can practice counting money for rewards, offer savings incentives like a pizza party to add “interest,” or practice planning and pitching business ideas for a family game night. There are plenty of child-friendly money learning resources available. 

The Best Finance Classes for Teens

Once we reach adolescence, money lessons become a little more serious. Not only because teens have plenty of opportunities to earn their own income, but because college, and the heavy tuition prices that go with it, are just around the corner. Research shows that young adults who receive financial education are less likely to carry credit card debt, and more likely to apply to and receive grants and financial aid. 

Less than 17 percent of high schoolers are required to take financial education courses, while 70 percent of teens have access to these courses. Encourage your teen to take any classes their school offers and work with them at home to enrich their learning. 

Younger teens are likely thinking about their driver’s license and part-time jobs, both of which are great learning opportunities to take advantage of. Whether your child will be paying for their first car and insurance or you will be, have them help you build a savings plan and budget for car maintenance and gas. If you’ll be taking out an auto loan, have them join in on the process and help calculate interest rates and monthly payments.

For older teens, consider helping them look for financial aid and choose an emergency credit card. This can give you peace of mind while also helping them build credit. Make sure they understand annual fees, APR, and minimum payments. Then sign them up for a credit monitoring app like Mint so they can see how making payments on time, missing payments, and credit inquiries can affect their score. 

Financial Responsibility for Adults

If you feel like you’ve missed out on valuable financial information or you’re looking into your first big purchase, like a house or a car, then there are plenty of resources online to help you learn about money. The first step is deciding your lesson.

If you’re looking to build a budget, you’ll want to start by understanding basic budget breakdowns. The most popular system is the 50/30/20 rule, which breaks down your monthly income into needs, wants, and savings. List out all of your purchases and divide them into these three categories, then figure out where you need to cut back on spending. Then build a spreadsheet or download a budgeting app to help you stay on track.

From there you can follow financial bloggers, YouTubers, and respected financial personalities to stay up-to-date on general financial trends. Your best bet is to check-in on things you need to know as you need them. For example, if you’re looking to buy a new home, YouTube has hours of resources to help walk you through the loan application process, how to save for a down payment, assistance programs, and how much you should save for closing costs. 

If you want more direct and robust learning, you can always enroll in community college courses. Many will be available online so you can fit them into your schedule, and you can choose topics as broad or specific as you’d like. Many institutions also offer grants, financial aid, and payment options to help you cover the costs. 

Of course, a certified financial planner is the best way to get current and accurate information. They’re a great resource for investment and savings strategies and can build a plan customized for your financial needs.

While financial education varies across the country, there are still plenty of opportunities for you to advance and share your money knowledge. From tracking your credit score to learning how to invest, there’s always room to level-up your financial literacy. 

Methodology

For this study, we compared household income data from the Census with household debt totals from the NY Fed to determine the amount of debt households have compared to their annual estimated debt contributions using the 28/36 rule. 

We also examined the Council for Economic Education’s research on financial literacy education and access and the Consumer Financial Protection Bureau’s financial well-being ratings. 

The data weights were as followed:

  • Financial education courses offered (pre-weighed by requirements) – 50%
  • Debt-to-income comparison – 30%
  • Financial well-being rating – 20%

Sources: Census | New York Fed | Consumer Financial Protection Bureau | SoFi

 

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